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The AUD/NZD recovery is backed by Australia’s stronger external position. Economists at Westpac Institutional believes a test of the 1.10 key resistance is on the cards.

Key quotes

“While the RBNZ insists the OCR will remain at 0.25% into 2021, we still see negative interest rates as likely in NZ, contrasting with the RBA. This debate should help limit AUD/NZD pullbacks near-term to about 1.06, with a multi week scope for 1.0860 and perhaps even a test of 1.10 resistance.”

“As for NZ, whole milk powder prices are 12% below the average of the past three years. We expect industrial commodities to outperform in coming months, with consumer spending struggling – a trend already clear in China. This favours AUD/NZD.”